A potential stablecoin panic could force the European Central Bank (ECB) to adjust its monetary policy, according to Olaf Sleijpen, the Dutch central bank governor. In a recent interview, Sleijpen voiced concerns that the rapid growth of dollar-pegged stablecoins could pose a systemic risk to Europe's financial ecosystem.

Sleijpen warned that if stablecoins were to become unstable, it could impact financial stability, the broader economy, and even inflation. He highlighted the risk of rapid sell-offs of underlying assets if large numbers of holders suddenly redeem their stablecoins for cash, potentially amplifying stress across markets. Many stablecoins are backed by assets like U.S. Treasuries, so large-scale redemptions could force issuers to quickly sell these assets, potentially destabilizing those markets.

The ECB might be compelled to "rethink monetary policy" if the shocks were strong enough, Sleijpen said. This could involve adjusting its interest rate path, either by raising or lowering rates, in response to financial instability. Such a move could undermine the ECB's current monetary policy goals, which include managing inflation and supporting economic growth. However, he noted that it remains unclear whether such a scenario would necessitate rate hikes or cuts.

The stablecoin sector has experienced significant growth this year, with an almost 50% increase in market capitalization. The overall valuation of stablecoins is currently $310 billion. Tether's USDT, the leading dollar-pegged stablecoin, has grown substantially over the past year, as has USDC, the second-largest stablecoin asset.

Concerns about stablecoins undermining the euro's dominance and disrupting the EU's monetary policy have been previously raised. ECB President Christine Lagarde has advocated for changes to the EU's Markets in Crypto-Assets (MiCA) regulation to address the potential fallout from a booming U.S. stablecoin market. She has also stressed that liquidity remains the most immediate concern, as stablecoin issuers often promise instant redemption at par while investing in assets that may not be liquid enough to support sudden demand.

The Bank for International Settlements (BIS) has also warned about the potential for stablecoins to undermine monetary sovereignty, create transparency issues, and increase the risk of capital flight from emerging economies.

While stablecoins offer potential benefits such as enhanced efficiency of payments, especially cross-border, their increasing scale and complexity pose significant challenges. These challenges extend beyond the crypto ecosystem, requiring central banks and policymakers to address their implications for financial stability, monetary sovereignty, and the smooth functioning of payment systems.